Business, general

Are risk-attitudes related across domains and response modes?

Article Abstract:

The nature of risk-attitudes over a series of differing payoff domains and response modes was studied in order to elucidate how risk-preferences in a specific domain and response mode predict, beyond chance, the risk preferences in other domains and response modes. The research studied only simple gambles. Three domains, gain, loss, and mixed, were examined, and three response modes, certainty equivalence, probability equivalence, and outcome equivalence were used. The research results revealed that gain and mixed gambles elicited strong risk-aversion; that the correlation of subjects across domains with risk preferences was low; that there was a less pronounced incidence of risk-seeking for symmetric loss gambles; that response methods within domains exhibited a high convergent validity; and that gambles using real payoffs displayed an increased risk-aversion towards loss but not towards gain.

Author: Schoemaker. Paul J.H.

Publisher:Institute for Operations Research and the Management SciencesPublication Name:Management ScienceSubject:Business, generalISSN:0025-1909Year:1990

Repeated optional gambles and risk aversion

Article Abstract:

The impact of age on the optimal dynamic strategy toward repeated independent gambles is examined. This study looks at the relation between the time horizon length of the decisionmaker and the optimal purchase of risks in a situation where the decision variable is binary. In this case, the decisionmaker has the choice of accepting or rejecting a prespecified lottery at every period. Results show that the presence of options to gamble again in the future has an impact on the decision to gamble at present. The effect is found to be ambiguous in general. The presence of a 'background effect' produced by an option may lead to avoidance of current risks even though the existence of an option may also foster a risk-prone behavior toward current risks. Nevertheless, the introduction of options to repeat the same lottery results in more risk-taking at present.

Author: Gollier, Christian

Publisher:Institute for Operations Research and the Management SciencesPublication Name:Management ScienceSubject:Business, generalISSN:0025-1909Year:1996

Gambling, Gamblers

User Contributions:

Comment about this article or add new information about this topic:

Public Comment:&nbsp (50-4000 characters)

Name:

E-mail:

Type the code shown:

Show my email publicly:

Characteristics of risk taking executives

Article Abstract:

An investigation into managerial risk taking and risk characteristics surveyed over 500 high-ranking business executives. The goal of the research was to see if common stereotypes about risk-taking behavior were true. Seven risk measures were identified using factor analysis, and information was gathered relating to professional characteristics, financial attributes, and personal traits. Research results indicate that when the traits and characteristics were examined using factor analysis, four significant factors were identified. Research results suggest that executives who have had the most success take the most risks, while older executives are the most adverse to taking risks.

Author: MacCrimmon, Kenneth R., Wehrung, Donald A.

Publisher:Institute for Operations Research and the Management SciencesPublication Name:Management ScienceSubject:Business, generalISSN:0025-1909Year:1990